A Bear Collar in United Parcel Service

I have had a position in the Submarine Basket since 01/23 for $UPS. Here is how the position looked into this week:

  • Short stock at $102.06
  • Short the February 06 weekly $103 Puts

Today I added the following to create a Bear Collar:

Long the February 06 weekly $102 Calls

Now let’s look at a few scenarios to see how the Bear Collar can work:

1) The stock closes at $100 this Friday (expiry). The Short $103 Puts would be assigned thus closing out the Short Stock piece for a -$.94 loss (if I don’t adjust the Short Puts, I likely would). The Long $102 Calls go poof. Overall gain/loss would be: -$.18

2) The stock closes at $103 this Friday (expiry). I would likely have adjusted the Short Puts to a future expiration (taking in a credit). The Long $102 Calls would be assigned thus closing out the Short Stock piece for a $.06 gain. Overall gain would be: $.82

3) The stock closed at $95 this Friday (expiry). The Short $103 Puts would be assigned thus closing out the Short Stock piece for a -$.94 loss. The Long $102 Calls go poof. Overall gain/loss would be: -$.18

 

One thought on “A Bear Collar in United Parcel Service

  1. Initial reaction post-Earnings is a mild pop to $101.64 (a stab at the 200 SMA above but came up a tad short) but faded back to near the key $100 level.
    $UPS

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